Buying A Home

What are the pros and cons of adding on or buying new?Before
making a choice between adding on to an existing home or buying a larger one,
consider these questions:

* How much money is available, either from cash
reserves or through a home improvement loan, to remodel your current house?
* How much additional space is required? Would the foundation support a
second floor or does the lot have room to expand on the ground level? * What
do local zoning and building ordinances permit? * How much equity already
exists in the property? * Are there affordable properties for sale that
would satisfy your changing housing needs?

Do we dig deep and buy a dream home or settle for a starter
home?

Choosing between a smaller house in an affluent neighborhood, an
older, bigger house in a more working-class community or a brand-new home is not
easy. If you're in this situation, start by examining your priorities and asking
the following questions:* Is the surrounding neighborhood or the home itself
the most important consideration?* Is each of the neighborhoods safe? *
Is quality of the schools an issue?* Do any of the areas seem to attract
more families with children or adult residents? And where do you fit in?

As for the return on your investment, home-price appreciation is hard to
predict. In the late 1980s, and again 10 years later, the more expensive move-up
housing appreciated wildly. But during the recession that followed, smaller
homes tended to hold their value better than more expensive ones.

How
do you choose between buying and renting?

Home ownership offers tax
benefits as well as the freedom to make decisions about your home. An advantage
of renting is not worrying about maintenance and other financial obligations
associated with owning property. There also are a number of economic
considerations. Unlike renters, home owners who secure a fixed-rate loan can
lock in their monthly housing costs and make prudent investment plans knowing
these expenses will not increase substantially. Home ownership is a highly
leveraged investment that can yield substantial profit on a nominal front-end
investment. However, such returns depend on home-price appreciation.

"For some people, owning a home is a great feeling," writes Mitchell A. Levy
in his book, "Home Ownership: The American Myth," Myth Breakers Press,
Cupertino, Calif.; 1993. "It does, however, have a price. Besides the
maintenance headache, the amount of after-tax money paid to the lender is
usually greater than the amount of money otherwise paid in rent," Levy
concludes.

As for evaluating the risk associated with home ownership, David T.
Schumacher and Erik Page Bucy write in their book "The Buy & Hold Real
Estate Strategy," John Wiley & Sons, New York; 1992, that "good property
located in growth areas should be regarded as an investment as opposed to a
speculation or gamble." The authors recommend that prospective buyers spend a
few months investigating a community. Many people make the mistake of buying in
the wrong area. "Just because certain properties are high-priced doesn't
necessarily mean they have some inherent advantage," the authors write. "One
property may cost more than another today, but will it still be worth more down
the line?"

How do I get accurate information on homes I am looking
at?

Home inspections, seller disclosure requirements and the agent's
experience will help. Disclosure laws vary by state, but in some states, the law
requires the seller to complete a real estate transfer disclosure statement.
Here is a summary of the things you could expect to see in a disclosure form:
* In the kitchen -- a range, oven, microwave, dishwasher, garbage disposal,
trash compactor.* Safety features such as burglar and fire alarms, smoke
detectors, sprinklers, security gate, window screens and intercom.* The
presence of a TV antenna or satellite dish, carport or garage, automatic garage
door opener, rain gutters, sump pump.* Amenities such as a pool or spa,
patio or deck, built-in barbeque and fireplaces.* Type of heating, condition
of electrical wiring, gas supply and presence of any external power source, such
as solar panels. * The type of water heater, water supply, sewer system or
septic tank also should be disclosed.

Sellers also are required to indicate any significant defects or malfunctions
existing in the home's major systems. A checklist specifies interior and
exterior walls, ceilings, roof, insulation, windows, fences, driveway,
sidewalks, floors, doors, foundation, as well as the electrical and plumbing
systems. The form also asks sellers to note the presence of environmental
hazards, walls or fences shared with adjoining landowners, any encroachments or
easements, room additions or repairs made without the necessary permits or not
in compliance with building codes, zoning violations, citations against the
property and lawsuits against the seller affecting the property.

Also look for, or ask about, settling, sliding or soil problems, flooding or
drainage problems and any major damage resulting from earthquakes, floods or
landslides. People buying a condominium must be told about covenants, codes
and restrictions or other deed restrictions. It's important to note that the
simple idea of disclosing defects has broadened significantly in recent years.
Many jurisdictions have their own mandated disclosure forms as do many brokers
and agents.